The UK formally exited the European Union on the 31st January and the talks have now moved on to the second stage of the negotiations which covers the future trading relationship.
The UK is currently trying to negotiate a free trade agreement with the European Union that will come into force after the end of the transition period (31st December 2020).
A free trade deal is an agreement between two or more countries to provide preferential access to each others markets that goes beyond World Trade Organisation (WTO Rules). Trade deals typically involve negotiations over:
It is worth bearing in mind that even with extensive free trade agreements (such as the CETA trade deal between the EU and Canada), businesses are still required to:
If the UK is unable to agree a trade deal with the EU then the UK will revert to trading with the EU on WTO rules. Trading on WTO rules means that countries cannot discriminate between trading partners and must offer the same trading terms to all other WTO member states.
The only exceptions to this are where free trade deals have been agreed and that states are allowed to apply preferential treatment to products arriving from developing countries.
Key characteristics of WTO rules are:
The UK and the EU began negotiations on the future relationship in March 2020 covering the future trading arrangements between both parties. This document contains further information on the negotiating objectives of both sides and what we know so far.
The UK Global Tariff sets out the new post-Brexit tariff regime which is scheduled to come into effect from the 1st January 2021. It will replace the EU’s Common External tariff and will apply to imported goods from countries which trade with the UK on WTO terms.